White paper
Automating IT Cost Transparency
Software that helps CIOs run IT like a business
Executive summary
IT spend has become one of the largest budget line items in
companies today.
IT organizations worldwide spend $6.3 trillion dollars annually,
and that figure is growing at 2.45X the rate of global GDP growth.
Despite rising IT spend, many IT organizations lack the capability
to clearly and easily articulate where that spend is going, how it
correlates to the services they are delivering, or what value the
business realizes from those services.
In order to stay competitive, businesses must optimize and align
future IT investments with the strategic direction of the company.
Technology spend can drive both increased efficiency through
automation (run- and change-the-business) and increased revenue
through new digital offerings (transform-the-business). By making all
technology costs transparent, IT can change the way business units
(BUs) consume IT resources, drive down IT unit costs, and focus on
IT spending that delivers real business value.
Apptio transforms the way IT runs its business and makes decisions.
With our cloud-based applications, IT leaders manage, plan,
and optimize their technology investments across on-premises
and cloud.
Apptio Cost Transparency brings together financial and operational
data and applies an industry-standard framework that automates
the manual work required to understand the total cost of IT resources.
With Apptio Cost Transparency, IT leaders are able to clearly
communicate and manage IT value in a context that business
partners can understand.
Cost transparency: The CIO’s key to gaining
the support of the business
For some CIOs, the natural response to a mandate to cut costs or
free up funding for innovation is to implement policies to stop
wasteful spending and force the business to comply. But anyone
who’s tried this knows that the business doesn’t respond well to what
they perceive as coercion tactics.
1 | © 2019 Apptio, Inc. All rights reserved. Trademarks and logos are the property of their respective owners.
That’s where cost transparency comes in. It may seem
counterintuitive, but a growing number of CIOs have discovered
that offering radical transparency into their costs actually converts
skeptical business unit leaders into active partners with IT.
Once business leaders see what CIOs are up against and how
BU consumption drives IT costs, they become willing participants in
the effort to change usage behavior, relinquish unreasonable holds
on legacy apps, and prioritize funding of initiatives that provide the
most business value for each dollar of investment.
Why traditional approaches to IT cost
transparency fail
Due to the highly interdependent nature of nested technology
services and underlying resources, IT costs tend to be extremely
complicated to model compared to other shared functions such as
HR, Sales, Marketing, etc. Consequently, the tools that have worked
well for managing the finances of those other functions fall short
when applied to IT costs.
Many IT organizations start a transparency initiative using
a combination of people and spreadsheets and struggle to achieve
their goals. They start by building out a large, complex spreadsheet
(or collection of spreadsheets) to capture costs, describe allocation
relationships, and implement some minimal reporting around
the data.
These spreadsheets tend to be very rigid, easily become stale
because data is hard to update manually, and offer limited reporting.
In addition, most of the “magic” associated with how the modeling
works typically resides in the head of a single financial analyst.
Even organizations with more defined data sources and robust
processes around their spreadsheets struggle to keep them up to
date. And while their reporting may be more developed, they still lack
the ability to deeply analyze new scenarios, quantify opportunities for
cost reduction, and make effective IT decisions in partnership with
the business.
IT and finance organizations can greatly benefit from moving away
from this manual, rigid spreadsheet approach and toward a solution
that automates IT cost transparency initiatives.
Apptio.com
 Automating IT Cost Transparency

Getting started with Apptio Cost Transparency

Apptio Cost Transparency gives IT leaders command over their business by bringing financial and operational data together to provide
analytics they can use to govern the business on an ongoing basis and shift the focus of conversations from cost to value. Apptio Cost
Transparency comes with pre-defined KPIs, best practice reports, and metrics that all IT functional owners need to manage their business.
Apptio Cost Transparency is the only solution that automatically aggregates, cleanses, and establishes relationships across large amounts
of data from disparate financial, operational, and vendor invoices, and maps that data into our standard IT cost model—across all on-
premises and cloud services.

Who needs Apptio Cost Transparency?

Infrastructure & Business Relationship

CIO & IT Leadership IT Finance App & Service Owners
Operations Managers

Communicate IT value Establish governance Show efficiency Manage application Align resources to
& fund innovation & accountability & justify spend portfolio for value business priorities

IT spend on run vs. grow? What is IT budget variance? Infra cost by category? Total cost of top 20 apps? Spend on each BU?

Project spend on initiatives? What’s fixed vs. variable? What are my cloud costs? Build vs. run costs? Run vs. grow for each BU?

Where can BUs affect cost? What’s each BU’s fair share? Infra cost related to apps? Spending to enhance apps? Spend by top BU priorities?

What our customers say

“We jumped in with both feet. We pulled the data, started pumping it into the
model, configuring rules and as planned, we were live in eight weeks.”

“We went from clumsy conversations about whether we had the right numbers
to value conversations about what services about what services they needed
and which they didn’t.”

“We reduced a third of our run budget and increased discretionary spend by 20X
to compete and innovate. The business has choices, can prioritize, then revise.”

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 Automating IT Cost Transparency

Deliver outcomes with Apptio Cost Transparency

Apptio Cost Transparency is built on a standard IT business model that leverages an industry-defined IT taxonomy. You can get started with just
a financial ledger, basic organization data such as employee list and business unit hierarchy, and simple asset and project lists.
Apptio Cost Transparency offers interactive reports that come ready out of the box and are built on best practice KPIs for IT managers across
all IT domain areas.
With Apptio Cost Transparency IT leaders achieve the following outcomes:

Proactively manage IT spend to budget

§§ Manage variance in the context of major areas of IT spend
like software, hardware, and internal/external labor.
§§ Identify spending trends and the specific line items and cost
center owners that are driving variances.
§§ Monitor OpEx and CapEx variance and your mix of fixed vs.
variable costs.

Make informed staffing decisions

§§ Manage hiring of internal and external labor against plan.
§§ Understand and compare average monthly cost of staff across
geographic locations and role types.
§§ Identify outliers to responsibly shift internal/external labor
mix or change hiring plans.
Understand infrastructure costs and trends
§§ See what’s driving infrastructure costs across network,
compute, storage, cloud, and data center assets.
§§ Monitor how much infra cost goes to supporting applications.
§§ Understand how infra cost breaks down across internal and
external labor, software, hardware, outside services,
and facility/power costs.
Align project resources to business priorities
§§ Provide trade-offs to the business to better align project and
application investments to business initiatives.
§§ In business terms, explain where project costs are going across
each business unit.
§§ Quantify how many IT dollars are going toward run costs vs.
growth investments and projects.
Manage the application portfolio for business value
§§ Quantify the business value applications deliver by tying
cost to business drivers (eg. cost per web visitor, order, etc.).
§§ Know the cost of your top 20 applications and how they break
down across run vs. dev, infrastructure, and projects.
§§ Show how business units are consuming each application along
with the associated costs.
Drive shared accountability of IT costs with
the business
§§ Explain in business language what each business unit gets for its
IT dollar and how they can impact bottom-line costs.
§§ Align IT projects and investments to business initiatives and by
business sponsor.
§§ Identify cost outliers by benchmarking IT spend per employee
across business units.

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 Automating IT Cost Transparency

Get a fast return on your Apptio investment

Many of our customers have leveraged Apptio to immediately impact active initiatives and projects by enabling better fact-based analysis and
using Apptio to communicate the business value of these efforts. Customers see return on their Apptio investment in two main areas.
The first area is in shifting run spend to growth and innovation funding. This happens as organizations get transparency into how and where
consumption is driving costs, and where cost inefficiencies exist in their current IT portfolio.
The second area is in productivity benefits realized by automating customers’ currently manual IT financial management processes.
The 8X return and 8 month breakeven below are output from our ROI model (which is certified by Forrester) using inputs from actual customers.
Your results will vary according to your unique inputs, but this provides an idea of what’s possible with an Apptio investment.
It only takes 10 weeks to get started with a few readily-accessible data sources.

How does Forrester calculate Apptio’s ROI‡?

8X 8mo.
Example ROI based on the following assumptions:†
$
50M annual operating budget
60% run-the-business spend
ROI Breakeven
40% grow and transform spend

†: Example based on purchase of Apptio Cost Transparency Foundation module and implementation services. Forrester applied its methodology to actual data provided by Apptio and interviews
with Apptio customers.

‡: Apptio commissioned Forrester to review the Apptio ROI model in June 2016 using its proprietary Total Economic Impact™ methodology. Forrester deems that the Apptio ROI model conforms to the TEI
fundamentals and principles of a sound business case. The intent is for Apptio to guide prospects through the questionnaire to solicit inputs specific to prospect business and technology environment.
Apptio is not permitted to change the calculations or equations. Forrester believes that this analysis is representative of what companies may achieve with Apptio services based on the inputs provided
and any assumptions made. Forrester does not endorse Apptio or its offerings.

You’ve heard the what and why of Apptio Cost Transparency and you’ve seen the outcomes and return
Ready you can expect. The rest of this paper unpacks the how, exploring the underpinnings that make Apptio
Cost Transparency work. If you’re already convinced, let’s start a conversation.
to talk? Contact us at Apptio.com/get-started

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 Automating IT Cost Transparency

How Apptio Cost Transparency works

Apptio Cost Transparency starts with raw financial data extracted from an organization’s general ledger. After cleaning and loading the data,
Apptio maps those costs into a standard set of cost pools that both IT and Finance understand, and which align with industry benchmarking
practices. From there, the calculation engine distributes those costs into standard IT functions called “towers,” and then on to applications,
services, and business units. All of this is built around the Apptio TBM Unified Model® (ATUM®), which provides out-of-the-box guidance for
gathering the right data, a standardized TBM Taxonomy of IT functions, and pre-defined cost allocation methods.

Business Units or Capabilities

Business Unit or Business Unit or Business Unit or Business Unit or Business Unit or
Describes the consumers of the

Business view
Business Capability Business Capability Business Capability Business Capability Business Capability
technology supported by IT spend

Applications & Services End User Services Business Application Services

Describes the products or output
delivered by IT and consumed
by business units Delivery Services Platform Services Infrastructure Services Emerging

IT view
IT Towers Data Center Compute Storage Network Platform Output
Describes the technology functions
supported by IT spend in terms and
groupings relevant to the owners
and consumers of those functions End User Application Delivery Security & Compliance IT Management

Finance view
Cost Pools
Describes the type of asset or service Internal External Outside Facilities & Internal
Hardware Software Telecom Other
purchased using terms and groupings Labor Labor Services Power Services
relevant to both IT and Finance

Figure 1: The TBM Taxonomy provides standard, benchmark-aligned IT categories.

What is TBM?
Technology Business Management (TBM) is a best practice discipline for managing the business of
Customer
IT. It provides technology leaders with standards (such as the TBM Taxonomy) and validated best
Sales Marketing Service
practices to communicate the cost, quality, and value of IT investments to their business partners.
The TBM Council is a nonprofit professional organization dedicated to advancing TBM. Apptio is the
Technical Advisor to the TBM Council.

By starting with an IT organization’s actual spend instead of assumptions or estimates, SAP Adobe Salesforce

Apptio captures hidden buckets of shared costs like network, facilities, and support labor that
fly under the radar of other solutions. Unlike BI tools or ERP platforms, Apptio leverages your
operational data such as asset databases and service request tools to intelligently break down
those shared costs so they can be fairly distributed to those elements that consume them.
Finally, we surface this in a reporting layer that provides rich self-service analytics, so you can Compute Delivery Network
explore the data and discover new insights on the fly.
With pre-defined IT domain knowledge, alignment to benchmark methodologies, and dozens
of pre-built reports, Apptio Cost Transparency delivers precisely what IT leaders need
in order to understand and communicate their IT cost structures, and make informed, Internal External
justifiable decisions. Labor Labor Software

Figure 2: Apptio’s approach to IT cost analytics maps actual costs from GL Journal Entry:
the GL to cost pools, IT towers, applications, services, and business units. Wages

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 Automating IT Cost Transparency

Automating IT cost transparency with Apptio TBM Studio

Apptio Cost Transparency is configured and managed using Apptio TBM Studio, which includes three required capabilities for TBM:
Data collection and organization | Model configuration and maintenance | Report configuration, analytics, and customization

Data Studio Model Studio Report Studio

1. Data 2. Model 3. Report

CleanseCleanse
Cleanse Normalize
Cleanse
Normalize Join
Normalize
Normalize
Join Map
Join
Map Join Map Map

Budget Budget
Budget HRHR
Budget HRGLGL
HR GL
IT IT Assets Projects
GL IT Assets
Assets IT AssetsProjects
Projects Projects

Data Collection Data Translation Cost & KPI Model Interactive Reports
Identifies which data sets are Translates disparate finance Uses IT data to apportion GL For IT executives, IT tower and
required from which sources and IT data into standard cost and calculates KPIs into budget owners, IT Finance
and automates collection structures and formats standard IT categories

Apptio Data Studio: Business Units

Business unit list

Find and assemble Headcount by department

data fast Applications Top 20 application list

Project details
Apptio Data Studio provides everything Projects
Time tracking
needed to gather the right data, intelligently
transform it, and enhance it over time. Fixed Assets Fixed asset depreciation schedule
Apptio is the only data solution built for TBM
Cloud AWS, Azure, and GCP billing logins
users and administrators - no DBA skills
required. Even better, only a few readily- Labor Available labor details (role, location)
accessible data sources are required to
General ledger (OpEx)
get started:
Capital expenses (CapEx)
Financials Budget (OpEx and CapEx)
Cost center hierarchy
Chart of accounts

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 Automating IT Cost Transparency

Apptio Cost Transparency supports multiple methods for getting data into the system and automating the regular, repeatable importing of
data from a variety of sources. Data can be entered manually in the same fashion as a spreadsheet, imported from standard file formats,
or automated via cloud-based or behind-the-firewall integration to existing sources of data such as the GL, asset databases, service desk,
or project and portfolio management solutions.

Figure 4: Apptio TBM Studio ingests and cleans raw IT and financial data according to a data pipeline
configured in a visual editor.

Weights and filters are defined and applied to encode the logic for translation between GL entries, cost pools, and IT towers.
Once that logic is established, it is applied in an automated fashion to ongoing data uploads. Because the system supports changes
in the underlying data schemas over time, users can introduce new sources of data and increase granularity over time without losing
the ability to compare to historical data.

How Apptio Data Studio delivers cost transparency

Data advisor shows you what data you need and where to find it
§§ Identifies required, recommended, and optional data
§§ Points to common sources that supply data
§§ Explains the effect of missing or incomplete data

Drag, drop, copy, and paste from any standard format

§§ Bring in data from any source system; no vendor lock-in
§§ Upload spreadsheets via drag and drop or automated schedule
§§ Support for standard data formats like XLS, CSV, and others

Automate and schedule data extracts with datalink

§§ Choose from a library of common source system data connectors
§§ Bring in data from cloud providers like AWS, Microsoft Azure, and Google Cloud Platform
§§ Schedule data pulls to occur on a regular basis

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 Automating IT Cost Transparency

With built-in transforms, Apptio handles it so you don’t have to

§§ Built-in transforms clean, validate, de-duplicate, and calculate columns
§§ Inference engine discovers relationships between disparate data sets
§§ Rule-based mapping organizes costs into standard cost pools and IT towers

Enables you to rapidly setup your data pipeline

§§ Quickly tailor your data operations pipeline
§§ Easily rearrange data operation steps with drag and drop
§§ Preview results of each step as you build

Illuminates data gaps so you can prioritize improvements

§§ Data quality dashboard reveals completeness and quality of data
§§ Highlights the largest data gaps so you can prioritize fixes
§§ Measures the amount of unallocated costs to quantify the impact of missing data

Apptio Model Studio: Visual cost model engine built on industry standards
Apptio Model Studio provides an easy to use, visual interface for capturing, describing, and evolving the relationships and associated
allocations across costs, utilization, and operational metrics for IT.

IT towers, applications, and services are complex, interdependent systems, and accurately measuring the cost of a component requires
understanding the cost of its sub-components or of components upon which it depends. Conceptually, Apptio allocates costs between layers
in the TBM Taxonomy using a variety of good/better/best methodologies, depending on what operational data is available.

Assumption-based Attribute-based Consumption-based

Costs routed based on assumptions Costs weighted by an attribute of an item Cost allocated by measured consumption

Labor costs allocated using a 25% / 75% Data center cost allocations weighted by # of Data center costs allocated based on
spread across Wintel and Unix Compute CPUs or kWh power rating measured power consumed during month

Data center costs estimated with a “rate card” Desktop cost allocations weighted by desktop Server costs allocated to applications based
value (e.g. $50/kW-mo) make/model on total compute hours per month

Application support labor costs allocated to Application support labor cost allocations Application support labor costs allocated to
applications based on “peanut butter spread” weighted by size or complexity of an application applications based on support tickets

Business application cost allocations Business application cost allocated across

Business application costs allocated across
weighted across LOBs based on # of assigned LOBs based on # of business transactions
LOBs based on % revenue
login accounts per month

Figure 5: Apptio Cost Transparency supports a broad range of allocation methods to fit any need and data fidelity.

Traditional IT cost analytics approaches leverage manually-updated spreadsheets with brittle modeling capabilities—allocation methods are
locked to the current model and are not easily replaced. Apptio understands that organizations evolve their cost models as new data is made
available. Apptio Cost Transparency is flexible to ingest new data and maintain a historical record of prior allocation strategies.

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 Automating IT Cost Transparency

Figure 6: With Apptio Model Studio, you view and define cost allocations between IT functions.

How Apptio Model Studio delivers cost transparency

Guided configuration of your cost model and allocations
§§ Step-by-step, visually-aided model designer
§§ Uses IT operational data to route costs by relationship
§§ Easily edit and customize allocation rules and weightings

Allows you to follow the money from source to destination

§§ Left-to-right illustration of costs flowing through your model
§§ Save and share visualizations to communicate cost allocations
§§ Customize visualization by attributes, such as application or business unit

Built on standardized cost model for IT

§§ Applies the Apptio TBM Unified Model (ATUM)
§§ Built around allocation strategies endorsed by the TBM Council
§§ Employs a standard set of best practice metrics and KPIs

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 Automating IT Cost Transparency

Apptio Report Studio: Interactive reports that let users drive

their own analysis
As the Apptio Cost Transparency model is configured and supplied with data, pre-built out-of-the-box reports are automatically populated.
Rather than being static representations of the data, these reports support interactive drill downs from high-level IT services to key underlying
metrics and cost drivers.

Figure 7: Apptio offers a rich reporting and IT cost analytics experience that is tightly integrated with the core
modeling environment.

Users can easily create custom reports from the entire range of data in the model and construct personalized reporting pages that are
automatically updated as the model is refreshed.

Support for historical reporting over various time periods enables trending costs and drivers, such as comparing actual unit costs to committed
rates for various IT services on a monthly or quarterly basis.

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 Automating IT Cost Transparency

How Apptio Report Studio delivers cost transparency

Rich reports and analytics to surface crucial insights
§§ Variety of visualization options including charts, graphs, treemaps, and more
§§ Instant access to standard analytics and the ability to create your own
§§ Library of KPIs and metrics from the ATUM standard

Familiar and intuitive tools for report creation and editing

§§ Drag and drop to quickly alter existing reports or create new ones
§§ Familiar tools such as a modular ribbon with standard formulas and actions
§§ Build and reuse common report elements

Self-service access to more contextual detail

§§ Easily add slicers and controls based on commonly requested views
§§ Drill down through rows, columns, cells, or chart series to obtain greater detail
§§ Pivot, slice, drop down, and filter to zero in on relevant views

Publish reports and data for broad consumption

§§ Access from any browser or device
§§ Export to standard formats, such as Excel, PowerPoint, or PDF
§§ PowerPoint slides auto-update from live Apptio data
§§ Export via API to other reporting platforms, such as Tableau

Summary
Apptio Cost Transparency gives CIOs and their teams visibility into what’s driving the total cost of IT products and services. Built on the Apptio
TBM Studio platform, Apptio Cost Transparency automates the manual work required to understand the total cost of IT resources and delivers
pre-determined outcomes in a fixed implementation timeline with easily accessible pre-defined data requirements.

“
“
I really can’t stress enough how much Apptio changed the conversation.
The businesses realize they are accountable for their consumption and
that’s made all the difference in the world.

Gerry Imhoff,
CIO, Maritz

Get started
Apptio fuels digital business transformation. Technology leaders use Apptio’s machine learning to analyze and plan their technology spend
so they can invest in products that increase the speed of business and deliver innovation. By translating raw costs, utilization, and billing
data into business-centric views, IT leaders shift spending from maintenance to growth.
For more information, please visit Apptio.com

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